Correlation Between Western Asset and Franklin Income
Can any of the company-specific risk be diversified away by investing in both Western Asset and Franklin Income at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Western Asset and Franklin Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Franklin Income Fund, you can compare the effects of market volatilities on Western Asset and Franklin Income and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Western Asset with a short position of Franklin Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Franklin Income.
Diversification Opportunities for Western Asset and Franklin Income
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Franklin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Franklin Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Income and Western Asset is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Western Asset Smash are associated (or correlated) with Franklin Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Income has no effect on the direction of Western Asset i.e., Western Asset and Franklin Income go up and down completely randomly.
Pair Corralation between Western Asset and Franklin Income
Assuming the 90 days horizon Western Asset is expected to generate 2.0 times less return on investment than Franklin Income. But when comparing it to its historical volatility, Western Asset Smash is 1.48 times less risky than Franklin Income. It trades about 0.0 of its potential returns per unit of risk. Franklin Income Fund is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 248.00 in Franklin Income Fund on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Franklin Income Fund or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Smash vs. Franklin Income Fund
Performance |
| Timeline |
| Western Asset Smash |
| Franklin Income |
Western Asset and Franklin Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Franklin Income
The main advantage of trading using opposite Western Asset and Franklin Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Franklin Income can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Franklin Income will offset losses from the drop in Franklin Income's long position.| Western Asset vs. The Gabelli Small | Western Asset vs. T Rowe Price | Western Asset vs. Davenport Small Cap | Western Asset vs. Tiaa Cref Smallmid Cap Equity |
| Franklin Income vs. Dimensional Retirement Income | Franklin Income vs. Qs Moderate Growth | Franklin Income vs. Calvert Moderate Allocation | Franklin Income vs. Transamerica Cleartrack Retirement |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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